Qume Market Mondays- 04 May 2020

Welcome to another edition of Qume Market Mondays!

This was a strong week for Bitcoin and the rest of the crypto market. Bitcoin continued to rally making this the seventh consecutive week of recovery.

BTC correlation to S&P US Equities has been very high but the last 3–4 days have shown a divergence.

BTC went up by 23.12% and is trading at 14% more than last week’s price level. The bullish trend preceding the halving continues and while it is still short of the predictions made by bitcoin maximalists, prices may continue moving up as more money flows in.

Volatility Indices

Although the 30-day volatility is now under 4%, it is slowly picking up. The 60-day volatility has been rising since March and is now at 7.99%.

With new money flowing in and bullish expectations reflected by the market, volatility should spike up. In the days leading up to halving some major markets movements are expected.

Derivatives Markets

Open Interest

BitMEX and OKEx account for almost half of the aggregated interest, with OKEx coming out on top by a small margin.

Binance Futures has also captured a significant portion of new money, their open interest volumes now matching up to OI volume of the CME group.

Trading Volumes

With halving just 8 days away, BTC Futures volumes are up and show strong price movement.

Arb Opportunities

Arbitrage opportunities continue to be scarce among exchanges with only 10–30BPS windows except for Exmo with a 40bps window, indicating no regional supply-demand imbalances.

Source: https://data.bitcoinity.org/markets/arbitrage/USD

Bid-ask spread

Bid-ask spread for BTC perps on major exchanges had been within reasonable limits with Bitfinex’s spread widening to 0.68% which is significantly higher than that of its competitors. Kraken and bitFlyer are obviously lacking liquidity and deep order books for now, with their spreads being more than 4–5 times the other exchanges.

BTC Options Volumes

BTC options volumes continue to be dominated by OKEx and Deribit. About 99% of the volumes were from these two exchanges and in that, Deribit accounts for about 81%.

LedgerX accounts for about 1% of the options volume. There is a call sell pressure between these two exchanges in option flows.

While put/call ratio for BTC options has gone back to under 1 like it usually is due to more interest in upside calls, the downside skew is still being priced higher than last year where calls were higher than puts. The 50% market move-down that happened in March suggests that memory of the move is still large hence, put volatilities have not repriced down. This reprice may start happening once we see a pick-up in perpetual swap premiums and futures trade steeply.

Data Sourced from www.skew.com

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